BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Networking longs, Semi longs and Biotech longs. I added to my (QQQQ) and (IWM) shorts, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mixed and volume is above average. Breadth has deteriorated throughout the day even as oil fell and long-term rates stabilized. It appears to be than more consolidation is necessary in the near-term before another push higher can commence. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking.
Monday, April 03, 2006
Stocks Higher Heading into Final Hour, Led by Tech and Commodities
Today's Headlines
Bloomberg:
- Warren Buffett, struggling to find acquisitions big enough to boost Berkshire Hathaway’s(BRK/A) returns, is making a $14 billion bet on the global stock market.
- Emerging market debt, up an average of 16.7% a year since 2002, will have difficulty continuing to rally, said Mohamed El-Erian, who runs Harvard University’s endowment.
- General Motors(GM) sold a majority of its GMAC unit to a group led by Cerberus Capital Management LP for $7.4 billion.
- Verizon Communications(VZ) agreed to sell its Caribbean and Latin American operations to Carlos Slim’s America Movil SA for $3.7 billion to reduce debt.
Wall Street Journal:
- Iraq may be better positioned to set up a government of national unity after a split among Shiite political parties and the increasing isolation of the radical cleric Muqtada al-Sadr.
- Hewlett-Packard(HPQ) CEO Hurd has made reorganizing the company’s corporate sales force a top priority after complaints from customers they didn’t know whom to contract.
- Constellation Brands(STZ) is close to an agreement to buy Canadian winemaker Vincor Intl. for about $1.05 billion.
- ProFunds’ Ultrashort Japan fund is aimed at helping investors to bet against Japan’s stock market by rising twice as much on a percentage basis as any decline in the US-traded, dollar-based Nikkei 225 futures contract.
- Movielink LLC, a movie downloading service, will allow broadband Internet users to legally purchase and retain electronic copies of new and catalog films starting tomorrow.
Boston Globe:
- Mercury levels in yellow perch near certain Massachusetts incinerators fell 32% in the past seven years, since the state enacted the nation’s toughest emission laws for the toxic metal.
NY Times:
- China’s trade surpluses may move toward a balance as labor shortage at factories push up wages.
- Conde Nast Publications upgraded Brides.com and plans magazine Internet sites for teenage girls and business as it increases its commitment to the Web to compete with rivals.
- Warren Buffett, struggling to find acquisitions big enough to boost Berkshire Hathaway’s(BRK/A) returns, is making a $14 billion bet on the global stock market.
- Emerging market debt, up an average of 16.7% a year since 2002, will have difficulty continuing to rally, said Mohamed El-Erian, who runs Harvard University’s endowment.
- General Motors(GM) sold a majority of its GMAC unit to a group led by Cerberus Capital Management LP for $7.4 billion.
- Verizon Communications(VZ) agreed to sell its Caribbean and Latin American operations to Carlos Slim’s America Movil SA for $3.7 billion to reduce debt.
Wall Street Journal:
- Iraq may be better positioned to set up a government of national unity after a split among Shiite political parties and the increasing isolation of the radical cleric Muqtada al-Sadr.
- Hewlett-Packard(HPQ) CEO Hurd has made reorganizing the company’s corporate sales force a top priority after complaints from customers they didn’t know whom to contract.
- Constellation Brands(STZ) is close to an agreement to buy Canadian winemaker Vincor Intl. for about $1.05 billion.
- ProFunds’ Ultrashort Japan fund is aimed at helping investors to bet against Japan’s stock market by rising twice as much on a percentage basis as any decline in the US-traded, dollar-based Nikkei 225 futures contract.
- Movielink LLC, a movie downloading service, will allow broadband Internet users to legally purchase and retain electronic copies of new and catalog films starting tomorrow.
Boston Globe:
- Mercury levels in yellow perch near certain Massachusetts incinerators fell 32% in the past seven years, since the state enacted the nation’s toughest emission laws for the toxic metal.
NY Times:
- China’s trade surpluses may move toward a balance as labor shortage at factories push up wages.
- Conde Nast Publications upgraded Brides.com and plans magazine Internet sites for teenage girls and business as it increases its commitment to the Web to compete with rivals.
Construction Spending Rises, Pending Home Sales Fall Again, Manufacturing Slow, Prices Paid Rises
- Construction Spending for February rose .8% versus estimates of a .5% increase and a .4% gain in January.
- Pending Home Sales for February fell .8% versus estimates of a .5% decline and an upwardly revised .9% increase in January.
- ISM Manufacturing for March fell to 55.2 versus estimates of 57.7 and a reading of 56.7 in February.
- ISM Prices Paid for March rose to 66.5 versus estimates of 60.9 and a reading of 62.5 in February.
- Pending Home Sales for February fell .8% versus estimates of a .5% decline and an upwardly revised .9% increase in January.
- ISM Manufacturing for March fell to 55.2 versus estimates of 57.7 and a reading of 56.7 in February.
- ISM Prices Paid for March rose to 66.5 versus estimates of 60.9 and a reading of 62.5 in February.
BOTTOM LINE: Construction spending in the US rose more than expected in February as homebuilding remained buoyant and companies spent more on hospitals and power plants, Bloomberg reported. Healthcare and power project construction rose 2.7% and 3.6% respectively. Construction spending will likely decelerate to average levels this year as slowing residential construction is mostly offset by increasing commercial building.
Contracts to buy previously owned US homes declined in February as sellers held out for the same high prices that helped undermine the housing boom, Bloomberg said. Re-sales fell .1% in the South and declined 7.6% in the West. Signings increased 6.8% in the Northeast and were unchanged in the Mid-west. The National Assoc. of Realtor’s is forecasting home prices to rise another 5.8% this year versus a 12.5% gain last year. I continue to believe housing is in the process of slowing to more healthy sustainable levels.
US manufacturing expanded at a slower pace in March as prices increased and new orders fell, suggesting companies are scaling back production in the face of cost pressures, Bloomberg said. The Prices Paid component of the index rose to 66.5 from 62.5 the prior month. The New Orders component of the index fell to 58.4 from 61.9 in February. I continue to believe manufacturing is slowing to average levels. As well, the Prices Paid component should begin decelerating again later this quarter.
Monday Watch
Weekend Headlines
Bloomberg:
- Wal-Mart Stores(WMT) said March same-store sales in the US rose about 1.3% as customers curtailed spending because of higher fuel costs and a later Easter.
- President Bush renewed his push for making his first-term tax cuts permanent and said Democrats who oppose the move would weaken the US economy.
- Alcatel SA(ALA) agreed to merge with Lucent Technologies(LU), creating a company with a combined market value of $36 billion to compete with Ericsson AB(ERICY) and Cisco Systems(CSCO).
- The Bank of Japan may keep interest rates low “for a long time” to allow consumer prices to reach levels they would have attained had the country not experienced more than seven years of deflation, said Paul McCulley, a managing director at PIMCO.
- Confidence among Japan’s largest manufactures unexpectedly fell in March in the first survey since the Bank of Japan ended its five-year deflation-fighting policy.
EE Times:
- For the first time in history, the optoelectronics market this year is projected to surpass the discrete semiconductor business and become the second largest segment in the semiconductor industry behind integrated circuits, according to IC Insights.
NY Times:
- Sherwin-Williams(SHW) and two other former makers of lead-based paint potentially face having to pay billions of dollars to repaint or renovate Rhode Island homes after losing a case in February.
- US conservation groups such as the Nature Conservancy and the Conservation Fund are trying to work out agreements with companies to buy up timberland to protect them from further development.
- The Tampa Bay Devil Rays baseball team have Wall Street experience in the front office where financial models and data mining join scouting and trades.
Reuters:
- Harrah’s Entertainment(HET), the world’s largest casino operator, said it would cost more than $3 billion to build a gaming resort in Singapore if its bid proved to be a winner.
Financial Times:
- Texas Pacific Group may this month say it has raised over $14 billion for a new buy-out fund.
- Time Warner’s(TWX) Time Warner Cable unit will aim to boost its mobile phone services by purchasing wireless spectrum or through acquisitions, citing an interview with CEO Parsons.
- Mergers and acquisitions are proving to be more successful and are creating greater investor value than during previous periods of high activity, citing a survey by London’s Cass Business School and consultants Towers Perrin.
Independent:
- Richard Branson, the UK billionaire who controls Virgin Group Ltd., plans to invest $400 million in factories producing ethanol, which may be used as fuel for his trains and planes.
AFP:
- US Secretary of State Condoleezza Rice and UK Foreign Secretary Jack Straw arrived in Baghdad on a surprise visit today to put pressure on Iraqi leaders to speed up the formation of a new government.
Middle East Economic Digest:
- Fluor Corp.(FLR) may win a contract worth $500 million to build a petrochemical plant in Saudi Arabia.
Weekend Recommendations
Barron's:
- Had positive comments on (ADM), (HSP), (TUP) and (MSFT).
Night Trading
Asian indices are +.50% to +1.25% on average.
S&P 500 indicated +.45%.
NASDAQ 100 indicated +.47%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/Estimate
- (IMGC)/.18
- (JOSB)/.98
- (MU)/.06
- (TARO)/.11
Upcoming Splits
- (DBRN) 2-for-1
- (NX) 3-for-2
- (FCEN) 3-for-2
- (BHE) 3-for-2
- (BWS) 3-for-2
Economic Releases
10:00 am EST
- Construction Spending for February is estimated to rise .5% versus a .2% gain in January.
- Pending Home Sales for February are estimated to fall .5% versus a 1.1% decline in January.
- ISM Manufacturing for March is estimated to rise to 57.5 versus a reading of 56.7 in February.
- ISM Prices Paid for March is estimated to fall to 61.0 versus a reading of 62.5 in February.
Afternoon
- Total Vehicle Sales for March are estimated to rise to 16.7M versus 16.6M in February.
Bloomberg:
- Wal-Mart Stores(WMT) said March same-store sales in the US rose about 1.3% as customers curtailed spending because of higher fuel costs and a later Easter.
- President Bush renewed his push for making his first-term tax cuts permanent and said Democrats who oppose the move would weaken the US economy.
- Alcatel SA(ALA) agreed to merge with Lucent Technologies(LU), creating a company with a combined market value of $36 billion to compete with Ericsson AB(ERICY) and Cisco Systems(CSCO).
- The Bank of Japan may keep interest rates low “for a long time” to allow consumer prices to reach levels they would have attained had the country not experienced more than seven years of deflation, said Paul McCulley, a managing director at PIMCO.
- Confidence among Japan’s largest manufactures unexpectedly fell in March in the first survey since the Bank of Japan ended its five-year deflation-fighting policy.
EE Times:
- For the first time in history, the optoelectronics market this year is projected to surpass the discrete semiconductor business and become the second largest segment in the semiconductor industry behind integrated circuits, according to IC Insights.
NY Times:
- Sherwin-Williams(SHW) and two other former makers of lead-based paint potentially face having to pay billions of dollars to repaint or renovate Rhode Island homes after losing a case in February.
- US conservation groups such as the Nature Conservancy and the Conservation Fund are trying to work out agreements with companies to buy up timberland to protect them from further development.
- The Tampa Bay Devil Rays baseball team have Wall Street experience in the front office where financial models and data mining join scouting and trades.
Reuters:
- Harrah’s Entertainment(HET), the world’s largest casino operator, said it would cost more than $3 billion to build a gaming resort in Singapore if its bid proved to be a winner.
Financial Times:
- Texas Pacific Group may this month say it has raised over $14 billion for a new buy-out fund.
- Time Warner’s(TWX) Time Warner Cable unit will aim to boost its mobile phone services by purchasing wireless spectrum or through acquisitions, citing an interview with CEO Parsons.
- Mergers and acquisitions are proving to be more successful and are creating greater investor value than during previous periods of high activity, citing a survey by London’s Cass Business School and consultants Towers Perrin.
Independent:
- Richard Branson, the UK billionaire who controls Virgin Group Ltd., plans to invest $400 million in factories producing ethanol, which may be used as fuel for his trains and planes.
AFP:
- US Secretary of State Condoleezza Rice and UK Foreign Secretary Jack Straw arrived in Baghdad on a surprise visit today to put pressure on Iraqi leaders to speed up the formation of a new government.
Middle East Economic Digest:
- Fluor Corp.(FLR) may win a contract worth $500 million to build a petrochemical plant in Saudi Arabia.
Weekend Recommendations
Barron's:
- Had positive comments on (ADM), (HSP), (TUP) and (MSFT).
Night Trading
Asian indices are +.50% to +1.25% on average.
S&P 500 indicated +.45%.
NASDAQ 100 indicated +.47%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/Estimate
- (IMGC)/.18
- (JOSB)/.98
- (MU)/.06
- (TARO)/.11
Upcoming Splits
- (DBRN) 2-for-1
- (NX) 3-for-2
- (FCEN) 3-for-2
- (BHE) 3-for-2
- (BWS) 3-for-2
Economic Releases
10:00 am EST
- Construction Spending for February is estimated to rise .5% versus a .2% gain in January.
- Pending Home Sales for February are estimated to fall .5% versus a 1.1% decline in January.
- ISM Manufacturing for March is estimated to rise to 57.5 versus a reading of 56.7 in February.
- ISM Prices Paid for March is estimated to fall to 61.0 versus a reading of 62.5 in February.
Afternoon
- Total Vehicle Sales for March are estimated to rise to 16.7M versus 16.6M in February.
BOTTOM LINE: Asian Indices are higher, boosted by financial shares in the region. I expect US stocks to open higher and to weaken slightly into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the week.
Sunday, April 02, 2006
Weekly Outlook
Click here for The Week Ahead by Reuters
There are some economic reports of note and a few significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - Construction Spending, Pending Home Sales, ISM Manufacturing, ISM Prices Paid, Vehicle Sales
Tues. - None of note
Wed. - ISM Non-Manufacturing
Thur. - Initial Jobless Claims
Fri. - Change in Non-farm Payrolls, Change in Manufacturing Payrolls, Unemployment Rate, Average Hourly Earnings, Wholesale Inventories, Consumer Credit
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Intermagnetics General(IMGC), Jos. A. Bank(JOSB), Micron Technology(MU)
Tues. - Delta & Pine Land(DLP), Dresser-Rand(DRC), Telephone & Data(TDS)
Wed. - Acuity Brands(AYI), Bed, Bath & Beyond(BBBY), Monsanto(MON)
Thur. - American Greetings(AM), Constellation Brands(STZ), Immucor(BLUD), Pier 1 Imports(PIR), Rite Aid(RAD), Stolt Offshore(SOSA), Terex Corp.(TEX), Triarc Companies(TRY)
Fri. - Longview Fiber(LFB), Mills Corp.(MLS), Shaw Group(SGR), Verint Systems(VRNT)
Other events that have market-moving potential this week include:
Mon. - Platts Global Power Markets Conference
Tue. - CIBC Biotech & Specialty Pharma Conference, CSFB Real Estate Conference
Wed. - CIBC Biotech & Specialty Pharma Conference, CSFB Real Estate Conference
Thur. - CSFB Real Estate Conference, Goldman Small-cap Growth Conference
Fri. - None of note
There are some economic reports of note and a few significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - Construction Spending, Pending Home Sales, ISM Manufacturing, ISM Prices Paid, Vehicle Sales
Tues. - None of note
Wed. - ISM Non-Manufacturing
Thur. - Initial Jobless Claims
Fri. - Change in Non-farm Payrolls, Change in Manufacturing Payrolls, Unemployment Rate, Average Hourly Earnings, Wholesale Inventories, Consumer Credit
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Intermagnetics General(IMGC), Jos. A. Bank(JOSB), Micron Technology(MU)
Tues. - Delta & Pine Land(DLP), Dresser-Rand(DRC), Telephone & Data(TDS)
Wed. - Acuity Brands(AYI), Bed, Bath & Beyond(BBBY), Monsanto(MON)
Thur. - American Greetings(AM), Constellation Brands(STZ), Immucor(BLUD), Pier 1 Imports(PIR), Rite Aid(RAD), Stolt Offshore(SOSA), Terex Corp.(TEX), Triarc Companies(TRY)
Fri. - Longview Fiber(LFB), Mills Corp.(MLS), Shaw Group(SGR), Verint Systems(VRNT)
Other events that have market-moving potential this week include:
Mon. - Platts Global Power Markets Conference
Tue. - CIBC Biotech & Specialty Pharma Conference, CSFB Real Estate Conference
Wed. - CIBC Biotech & Specialty Pharma Conference, CSFB Real Estate Conference
Thur. - CSFB Real Estate Conference, Goldman Small-cap Growth Conference
Fri. - None of note
BOTTOM LINE: I expect US stocks to finish the week mixed as mostly positive economic data, stable energy prices and short-covering offsets higher long-term rates and profit-taking. My trading indicators are now giving bullish signals and the Portfolio is 75% net long heading into the week.
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